A certificate of insurance is the best way to avoid paying big bucks for a claim. In this day and age, many insurance companies hire independent contractors to manage their administrative duties, such as employee benefits and human resources, and also their sales and distribution. The problem with this is that 3rd party suppliers do not have much control over these operations. What increases is the clients demand in order to obtain a Certificate of Insurance or COI.
A COI proves that the 3rd party insurance has indeed purchased all the insurance coverage required. The COI does not extend, alter or amend any type of coverage. The COI is important because it shows the insurance overage the outside contractor is entitled too. The COI is a protection against liability for negligence that may have been caused by an independent contractor.
An independent contractor has the responsibility to provide a COI to any client that hires the firm. Usually, the COI is provided by an agent or broker and a copy is always sent to the insurance company. A copy is also sent to the client for whom the 3rd party is providing insurance coverage for.
What is contained in a COI
- Name of Insured
- Name of company issuing the polices as stated on COI
- The specific types of coverage that are contained in insurance policies issued
- Normal policy term descriptions
- Exclusions and conditions
Commercial general liability protection is the means in which COI’s are usually obtained for. Normally, a general form will give a brief description of standardized coverage terms. In terms to high risk coverage, a manuscript of the COI can be provided as a security measure.
There are two types of general liability forms claims-made and occurrence. There is a big factor that differentiates one from the other. In a claims made policy, it states that an occurrence must take place within a policy period and they claim for the occurrence must be filed during the policy period. As for a occurrence policy, the occurrence must take place within the policy period but the claim can be filed anytime.
Many consequences come with not monitoring a COI. In the end, this can be very costly. So the best way to avoid paying high costs is to carefully monitor and follow your COI.